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"You Never Go Full-Krugman": Insane Helicopter Money Calls Continue As Trapped Central Banks Face Keynesian Endgame
For those who follow the pronouncements of central bankers and the sellside penguin brigade, one thing you might have noticed recently is an increase in the number of very “serious” people who are suddenly calling for so-called “helicopter money.”
“Seriously.”
Take Citi for instance, where both the firm’s chief economist Willem Buiter and global head of G10 currency strategy Steven Englander both called for helicopter money in September as apparently, the only way to save the world now is to simply have the government print debt certificates only for the central bank to immediately monetize them.
Note the enormity of that suggestion: that is just one degree of separation away from suggesting that central banks literally drop cash from the sky.

("Yes, more of that!!")
On Wednesday, we bring you the latest “helicopter” analysis courtesy of SocGen who apparently fears that the only way to avoid secular stagnation (which, for the uninitiated, is just another complicated-sounding, economist buzzword for the more colloquial “everything grinds to a halt”) is for central bankers to call in the Krugman Kraken and go full-Keynes.
* * *
From SocGen
Hard landing – the long view
The long-term view for case 3 (hard landing / reform) essentially reflects a return to more normal market conditions. Reforms support a quick clean up of the balance sheets and a recovery in productivity, which pushes real yields up. Fears of deflation subside, and that too contributes to a normalisation of bond markets. Yields rise: the secular bond rally is over. There is little value is discussing that here. Instead, we focus on the most extreme scenario (case 4), that sees prolonged economic pain (hard landing, lost decade).
In case 4, the medium- to long-term bond view depends greatly on the policy response, especially in G4. Of course, government debt has risen sharply since the financial crisis; hence there is much less room for fiscal stimulus. Economies where public debt as a percentage of GDP is relatively low, and more generally where levels of non-financial debt is contained (Graph 8), are expected to offer better resilience, and this is generally expected to be reflected in the relative performance of sovereign bond markets. In a hard landing scenario with durable global economic pain, investors tend to focus on the balance sheet risks. Japan has been an exception, i.e. has remained a safe haven despite its enormous government and more generally non-financial debt load (Graph 7). This is, to a large extent, thanks to its exceptionally large and positive Net International Investment Position (NIIP), which tends to support repatriation in crisis time.
Generally, the public debt sustainability issue means that one cannot count on fiscal policy to fix the problem. Market discipline indeed limits the potential for proactive fiscal easing. We see four potential policy directions and they all imply very distinctive scenarios for bonds:
1. Monetary financing. There isn’t much fiscal room, unless central banks accept to finance it. That isn’t possible everywhere, e.g. it is forbidden in the eurozone. In areas where it is possible, central banks might accept to fund new government spending or tax cuts. The US already has had recourse to such a powerful policy mix response, which partly explains its strong economic outperformance, e.g. relative to Europe, since the great recession (a quicker clean-up of the banks also helped).
2. Qualitative easing. Central banks print money, but choose to buy private assets. It remains to be seen whether the transmission mechanism, through the portfolio and credit channels, will be working. By buying private equity and bonds, the central banks facilitate the funding of private entities, but this isn’t necessarily a trigger for them to invest and spend
3. The helicopter. Rather than buying assets, central banks drop money on the street. Or even better, in a more modern and civilised fashion, credit our bank accounts! That, after all, may be more effective than buying assets, and would not imply the same transfer of wealth as previous or current forms of QE. Indeed, ‘helicopter money’ can be seen as permanent QE, where the central bank commits to making the increase in the monetary base permanent. Again, crediting accounts does not guarantee that money will be spent – in contrast to monetary financing where the newly created cash can be used for fiscal spending. And in many cases, such policy would actually imply fiscal policy, as most central banks cannot conduct helicopter money operations on their own.
* * *
So again, the thing to realize here is that this has moved well beyond the theoretical and it's not entirely clear that most people understand how completely absurd this has become (and this isn't necessarily a specific critique of SocGen by the way, it's just an honest look at what's going on). At the risk of violating every semblance of capital market analysis decorum, allow us to just say that this is pure, unadulterated insanity. There's not even any humor in it anymore.
You cannot simply print a piece of paper, sell it to yourself, and then use the virtual pieces of paper you just printed to buy your piece of paper to stimulate the economy. There's no credibility in that whatsoever, and we don't mean that in the somewhat academic language that everyone is now employing on the way to criticizing the Fed, the ECB, and the BoJ.
There's no sense to the helicopter thesis at all. That is, if the answer to slumping global growth and trade was as simple as me printing one paper liability and funding it with another liability that I also print, then everyone's problems would have been solved a long time ago. In the simplest possible terms: if I can just print paper money and hand it to you and solve not only mine, but your problems, then there are no problems.
Here's a message to central banks: outright deficit financing is beyond "erroneous" - it simply doesn't make any sense at all. Even if someone believes in the value of the paper you print, you can't just generate one kind of paper on one printer (i.e. Treasurys) and then use the other kind of paper you print (i.e. currency) to buy it and then shower the proceeds on the clueless masses. That's a monetary charade that not even the American public will buy for long.
Put simply, "there were times ... when I was doing Krugman that I actually felt like Krugman, like really Krugman..."
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Get to the Choppa! Run!!
Since 1990, global population has risen by 2 billion persons*...
However, the growth crushing asterisk is that the 0-5yr/old global population segment (headwaters of true population growth) has risen by a mere +16m since 1990...all of the remaining 1.984 billion of the population "growth" is simply everyone living longer...aging pig through the python. This is why CB's have taken over markets...this is why NIRP is coming.
http://seekingalpha.co...
Back up that gold truck. When the institutions are done with whatever it is they give/sell it to the general population.
I had a Full Krugman floating in the toilet last night after some bad Mexican food
www.denk-bubbles.com/helicopter
www.denk-bubbles.com/krugman
www.denk-bubbles.com/plebs/
Krugman is the kind of guy who yells "See? I told you so!" at the turd he leaves in the toilet every morning.
The E Dollar makes more sense for TPTB than helicopter money or directly banning cash and negative rates. Details shown here.
Krugman is a deadly plague on this planet and needs to be erradicated/neutralized.
Why drop it when you can simply make a withdrawl?
NIRP will accelerate the collapse of the current system and the death of fiat!
Bring it!!!
Agreed. If they are going to add a few 0's to the money anyway, I'd love to be the first in line for a change. Hopefully the new boat I'd buy with it would hold up better then the last one after I visited the coin shop.
I want my two dollars! Or in this case, 2 Quadrillion credited units of transactions.
Are you really going to keep posting this on EVERY article? C'mon Ham-bone.
who the fuck are these paid troll accounts on zh posting seeking alpha articles? this whole fucking comment boars is infested with paid trolls of various sorts reposting links and reposting nazi anti-semitism and the same shit over and over. is there any intelligent life left on these comment boards?
Yep. It's gotten way out of hand. The comment section is becoming little more than a pimp-fest for various half-assed blogs.
This post by Ham-bone has a deceptive link it in. http://www.seekingalpha.co/ redirects to something called borntosell.c*m .
Great idea. I could use 20,000 - 30,000 USD since my
business has collapsed due to the successful economic recovery.
bring it on...
In the end it all comes down to wealth distribution in late capitalism. This is why I believe that helicopter money is a way out of the problem, as long as it is created by treasury, not Fed. Money injection into the economy of debt free money. Some inflation is a given, actualy even desirable. Debt free cash would resolve the problem of missing money for interest which has been accumulating for some time now. It would undo the QE at least and have some excelent effects on world economy in chains of unpayable USD debt.
However even if done properly, it is only a starting stage for the TALK. The TALK of what the hell went wrong.
Here are two things that went wrong:
1.) 300 individuals own more wealth than the 3.5 billion poorest people on the planet. This extreme wealth inequality is the source of most of our ills. These 300 individuals do not work ten million times harder, or more productively than half the people on the planet. They have rigged the system in their favor, and that must change.
2.) A misanthropic cabal has hidden cheap, clean energy from humanity for more than 100 years. Since the price of energy is embedded in everything from food to housing, this has caused damages in excess of $600 Trillion in addition to unnecessarily polluting our only biosphere.
Put a price on that!
For more details, see SIRIUS The Movie at:
http://www.SiriusDisclosure.com/
Source: https://www.youtube.com/watch?feature=player_detailpage&v=0gVLv5eg4Xg#t=...
Do it you stupid Bitches!!!!
The sooner the better
300 million people in the USA, just send each one a 1 million dollar check and see what happens. Of course it's the wrong people and not in the trillions, so it'll never happen.....
Helicopter money = rate hike = Fed bullshit.
FUCK OFF AND DIE KRUGMAN YOU PIECE OF SHIT!!!
Can somebody jus shove a huge Matzoh Ball into that fuckers mouth & create a levered paper market on which nostril the snot will come out of first?
"Okay patriotards, you want real money? Here come your helicopter silver coins of death, MUHAHAHAH!!!"
"Lets Roll."
Jump! You Fuckers!
I think you have to be some kind of gullible to think the bankers of the world will ever be showering the masses with money. Much easier just to keep the current system in place and start charging negative interest rates on balances - lets see, I borrow at +5%, but my savings account earns -2%....
correct
and those proposing such nonsense never seem to mention what would happen to the poor saps working minimun wage when they suddenly got a check for a $5000 or $10,000.
Most would quit their jobs ... leaving business a smoldering crater
A 5K or 10K payday might see your local McD's shortstaffed for about a day, then the employee parking lot would be full of new cars that need to have payments made.
We're probably talking more like $450 Bush Refund amounts. I've lived to see things I could not have imagined so far, and I think it's about to get really WIERD in the near future.
If you were wise you would just pull your money out now.
Yes. It will not take people long to realize that a mattress is a safer place for money and assets. This will only accelerate the death of fiat, fine by me.
If I get no no risk reward for my savings then I have no need to deploy it in a risky gambling bank.
I withdraw all and buy insurance in silver and gold coins or other tangible goods that have a use factor.
A bank cannot function without a bank of savings for flow and margin taking.
Never can happen
Fed will do a rate hike AND chopper money at the same time. It is the only way.
like the paltry $300 GWB had refunded?
sure to go far.
It has to be over ten grand or it's a wash.
More like 50 to a 100 grand.
Weee
unleash the puking unicorn !
...You get gold in triple digits. You do that.
I double dare you motherfuckers. I really do. I'm waiting.
I dunno. The chance to behave like one of the 0.01% before it all explodes might be fun for a while.
For a day or two, before all of the inflation strikes.
Going to be deflationary. A good percentage of people will use some of this $$ to pay off debt.
Kaboom goes the helicopter money and the debt.
They cannot run the system without balancing both sides or it instantaneously blows. (someone has to borrow that helicopter money to balance the books)
That is why when you get a "loan" there is cancelling debt on the bank's books.
If they were to simply unleash printed raw currency, it would blow up the system.
They always threaten that they can do the helicopter option. That is for your consumption. Look behind the curtain and see their money system for what it is.
A sham. And not a very good one.
pods
They did the helicopter option to an extent in 2010. Home buyer tax credits and the increase in the EIC.
I think they'll go mega EIC next. Something like 10k plus if you earn under 50k. If the dollar amount is high enough people will spend after paying off some debt. A 20k or some other insane number housing DP assistance/credit will follow the popping of Housing Bubble 2.0.
Trump has already spoke of zero income tax for low earners. I have a feeling they're sewing the seeds for the next helicopter drop already...
"........simply unleash printed raw currency, it would blow up the system....."
Exactly Right.
Not Going to Happen.
As I have said over the years, Hyperinflation is Politically Impossible in the United States.
Anyone who believes "Monetary Policy" can override "Political Reality" is truly Delusional.
"Deflation" will be the Outcome as it has been repeatedly in the past.
...and a close-up "view" of a lamp post up high looms... ?
I am reminded of the Nazi propaganda film made by Stanley Kubrick's wife's uncle, Veit Harlan, named Jud Suss.
"Hang 'em high!"
https://youtu.be/zQETxheEg_c?t=2m37s
2:37 mark
Hanging at 4:00 mark.
Lunacy such as this is why we've made a concerted effort to eliminate all "bad" debt from our lives. While the US dollar is still kinda worth something. We'll be there in a few months.
Move rates to -5%. The 99%ers can get the money back that was stolen by the 1%.
How does the bank taking principal out of your savings account at the rate of 5% annually help the 99%-ers?
I suppose, under his negative rate scheme, one would be paid to take out loans. Therefore, if you took out a loan on a house, car, degree, washing machine, etc., you would theoretically make money on the deal.
This assumes of course that the prices of those goods remain static even as rates go negative.
Negative-rate loans ain't never gonna happen. The only thing negative will be the rate you get on the unsecured loan YOU make to the bank in the form of a deposit.
ZH did a few pieces earlier on the year on negative-rate mortgages in Europe.
http://www.zerohedge.com/news/2015-01-30/denmark-you-are-now-paid-take-o...
http://www.zerohedge.com/news/2015-04-14/banks-across-europe-pay-borrowe...
Last night I told my wife how reading Science Fiction as a kid helps me today. I've lived long enough to see a lot of the bizarre prediction in those novels coming true.
Likewise with Central Bankers doubling down at every chance rather than admit failure. Extrapolated to Helicopter Money. First I read the fantasy on tinfoil-hat wearing blogs (kidding) and now I get to read the trial balloons floated in mainstream finance media.
Insane.
"The US already has had recourse to such a powerful policy mix response, which partly explains its strong economic outperformance, e.g. relative to Europe, since the great recession (a quicker clean-up of the banks also helped)."
clean-up of banks??
haha
at least dope was correct that central banks can't conduct helicopter drops without help from govt
This process has been working for 7 straight years in America and 20+ in Japan. Given Japans state, you'd think the American central banksters would have learned what not to do, but they didn't. However, they did learn how to buy more time, protect adn enrich their friends, and kick the can down the road.
And just how much are they talking about? Ten grand should be a minimum.
I hope they do it so those of us who know what's going have a chance to benefit a little before it all goes to shit. We'd have some extra cash to put those final plans in place.
Don't drop money, drop turkeys. We can do it in time for thanksgiving
Hey...hey...hey..(bill cosby style), sounds like a plan, count me in.
WKRP Turkey drop!
https://www.youtube.com/watch?v=p00nBSNIPwg
Helicopter money worked so well in Zimbabwe.... like the man said there is "History" then there is "African history".
I'll take mine in gold please.
Would that qualify as a reverse 'bail-in" twist? At least the money would "hit" the street, and the FED would get the inflation they desperately want! NOW THAT"S WHAT I CALL A STIMULUS!
For once, he is right. The problem is excessive debt, the helicopter money should be given with the condition that those with debts must pay them back with it. At the exact same time, the FED should completely undo all the QE, thus removing the excess supply of dollars.
This will be a reset of the whole system, and it should be accompanied by strict regulations on lending, borrowing, leverage, insider trading, bank size, seperation of commercial banking from investment banking etc.
Only then it will work.
I think you're missing the glaringly obvious point that the current system is functioning EXACTLY as it was intended to function, by those who created it.
What you say would be true, if the object were to run an impartial monitary system, for the benefit of all who work honestly and diligently.
But it isn't. And it never was.
The object is to use the monitary system to harvest the fruits of humanity's labors, for the benefit of a handful of psychopathic banking parasites.
And THAT, it is doing PERFECTLY.
Oh just do it already and do it big, 50K per person. Money velocity will spike and start the primary hyperinflationary implosion.
Never go full retard!!!!
They can dump all the money they want but most people see no benefit. As one hand gives, the other takes even more away.
The majority of people are LOSING money through frauduently understated inflation - with REAL prices going up close to 10% a year, static or DECREASING wages, by not getting any interest on their savings (if they have any) and by paying high interest on their ever increasing debt.
Only the firms getting money as it's shoved out the door - the big banks and Wall Street - are benefitting from all this. They're taking all that free money and going straight to the casino with it. They keep any winningss and pawn off any losses back on gov.
Well, in crediting our bank accounts directly, they would lessen the burden of our debts generally, rather than lessening the burden of only their cronies debts.
It would be much less distorting to the economy, as whole sectors and industries have grown solely to support cronies with newly made money.
Those are all positive things.
Now for the negative.
The only reason we've not seen an explosion in the general price level thus far is BECAUSE the newly made money has been isolated in the hands of their cronies and those who sell the cronies the things that cronies like.
So.
Which do you prefer?
To have the value of your money drop to nothing very quickly? (But the cost of your mortgage and other debts too!!!)
Or to have the value of your matress cash (in hand, not in a bank...the banks will be bankrupted by defaulting loans and take savings account cash with them) skyrocket in value, while your debts also skyrocket in value?
If you owe then you probably prefer #1.
If people owe you, and you are not a bank, then you probably prefer #2.
Given the credit expansion amongst the common man since the Great Depression, I suspect most people fall into the first group.
But I suspect most of the top 1% fall into the second group.
Nicely spoken.
They won't let deflation happen, so assume prices will skyrocket to debase the debt. It is always the end game.
Quite simply, the markets have not woken up to the idiocy of QE, ZIRP or helicopter money. There is somehow this belief that by creating fake demand by creating purchasing power out of thin air, everything will be fine. QE and ZIRP created fake purchasing power for financial assets. Sure, financial assets boomed, but the economy didn't and in the end financial asset prices are supported by real earnings, not PE revaluation. Now, they theorize, if they drop money into people's hands to spend, real world prices will boom. Guess what? They will! You will have runaway real economy inflation and PEs on financial assets will drop, though earnings will boom with inflation and stocks could even rise further (not in real terms, just due to inflation...you won't have greater purchasing power). BUT, it all ends like Venezuela, Weimar, etc. because who is going to produce to exchange real value for confetti? Taken to the extreme, consider dropping $1million into everyone's bank account once a week and the fallacy is seen immediately. No one would work and make anything, we'd all be rich on paper. We would just buy and trade what already exists at ever higher prices until the shelves are bare.
Instead of focusing on encouraging entrepreneurship, productivity, education, innovation, saving, etc. economists have decided that it is best to try and fool everyone by inflating asset and, if they succeed, real world prices. All they are proving is that people will take free money and bid up prices, which didn't need to be proven as it was already obvious and doesn't actually create any value, while being incredibly dangerous at the same time. The histories of economies characterized by endless credit/debt creation instead of savings to fund growth are actually quite miserable. Inflation is very destructive to efficient capital allocation and unproductive for the economy. They don't mention that part.
Demented. The man is demented, I say. Look at that photo: positively diabolical, maniacal, full crazed.
We just need more cowbell.
Weimar Republic 2.0 in 5..4..3..2.......
ONE
Ah Krugman, you slimy bastard,
I'll take the cash. All else is speculation.
Helicopter money is a better idea than QE: everybody would get some, inflation would certainly pick up and PMs would fly.
my question is why the money always ends up in the pockets of the crooks on Wall Street...even the stupiest media person must at this point realize what scam this is. Blankfein and Dimon annouce they are billionaies....Yellen calls for more ZERO RATE MONEY FOR BANKERS? Really?
"...called for helicopter money in September as apparently, the only way to save the world now is to simply have the government print debt certificates only for the central bank to immediately monetize them."
Just how does that save the world? It made a mess out of Zimbabwe and it is making a mess out of Venezuela.
If you can't afford something because you have no money or because the money doesn't buy anything, the result is the same.
Laws, rules, statues and other unlawful actions that give a document (unliving) the same rights as living things is necromancy.
This is your problem. Liability would fix that problem.
Liability allows for awareness, awareness leads to conversation and coversation leads to thought.
Its this thinking that allows for questions and the solutions to puzzles that questions create.
This is when lies, fraud, decite and cons must come undone for they cannot hold up to thinking. Creation of credit would be reduced if the lender suffered time in jail or loss of his wealth as an assessury to crime, accidents and other lawful or unlawful actions. If a driver of a car must face the same crime as the robber then so must the lender and ficilitator of economy of the crime. Robbers dont hire drivers to steal pinecones.
Fix the liability and you fix a great many things.
Got to love Krugman, a full-on court jester! He has no power....just a dumb idea that people ascribe to
Yeah, once they credit everyone's bank account (free money, yay!) they'll have proven the methods to debit everyone's accounts (NIRP here we come!)
What an idiot. Keyenesian economics is a joke. Who would have ever guessed that giving full control of a country's monetary system to a single entity could cause it to become corrupt?
Btw, after recieving the economic nobel prize award, Krugman identified himself as a Social Democrat. Thank god for reality, otherwise people might actually buy into Socialism's bull
His alien invastion scheme seems more realistic.
Holy crap. Corporations and the top 10% have never been richer in history. Somebody's already getting a shitpot of money. And we're calling for a helicopter drop? Sounds like that's already been done. Problem is it's all been scooped up by a few. Excuse me, but our governement is being run by complete idiots. Actually it's being run by the scoopers. Which there in lies the problem. The entire problem, period, end of story.
Don't forget the politicians. They've never been richer, as well -- and most of them have never had a real job or had to meet payroll their entire lives.
Half-baked.
Why not end federal bond markets? Just print, without debt, to solve each other's problems. Use an exchange rate mechanism to account for printing abuse.
Then let the machines have our jobs.
The price of meat will go up. And your old lady will go down.
Drop it! And as soon as it hits the ground,I'll buy more land,food,ammo,and build a cabin. Let hyperinflation run rampant. I'll be set up and not have to worry. I'm already set in most ways,but a duffel bag full of cash would seal the deal for me.And after it all goes to hell in a handbag,I still have my PM's to buy the things at a penny on the dollar everyone else is selling just to survive.
They are so hypnotized by the complexity they've woven into the system, they've lost sight of what an economy is, and what it's for, and of the proper role of money in that economy. They're like the guy on acid who suddenly becomes so absorbed with the all lines on his palm, he walks right into traffic.
Had the Fed and Congress simply paid off the mortages of homeowners in 2007, where the money would have gone directly back to the banks to re-cpaitalize them, then the need for QE would have been moot. Instead, an economy that relies upon consumers was only made worse with foreclosures and layoffs, and the idiots at Eccles continue to play the game of insanity by believing QE will go towards production and jobs.
Dovie'andi se tovya sagain (It's time to toss the dice)
The Daily Economist
THis would have failed too, what a moronic premise. For EVERY gov't action, there is an equal and opposite reaction somewhere else, you're simply neglecting to discuss it.
You Only Live Twice - The Piranha fish Scene KILL BOND NOW!
http://www.youtube.com/watch?v=Maos82cqguo (2:29)
Socialism is guaranteed to fail:
http://www.teapartytribune.com/2015/05/18/two-laws-that-guarantee-social...